QQQ Chart All Gnarled Up in Megaphones Again

QQQ Megaphones in Megaphones on 60-Minute Chart

QQQ Megaphones in Megaphones on 60-Minute Chart

QQQ is all gnarled up in megaphones for opex week.  Right now it’s megaphoning across VWAP of the red megaphone on the 60-minute chart.

The blue megaphone at the top of the red megaphone needed a retrace to VWAP and this morning’s little gap up took care of that.  Now the little orange megaphone needs a retrace to at least its VWAP at roughly 131, and it’s a favorite to go for the red and orange megaphone bottoms (green scenario) unless it gets bogged down in a new megaphone across 131 (pink scenario).

The pink scenario would usually mean a triangle is forming between the red megaphone high and low.

There is no fast escape from this muddle.  Any move to a new red megaphone high or low will require a retrace to 131 before a real breakout because of the interior megaphones.

QQQ Megaphone

QQQ Maxed Out a Price Channel Melt-Up Set-Up and has been Forming the Light Blue Megaphone Since

QQQ Maxed Out a Price Channel Melt-Up Set-Up and has been Forming the Light Blue Megaphone Since

QQQ maxed out the waves in a price channel melt-up set-up (navy blue channel to red roll-up channel to orange channel) within a rising wedge (gray on chart) and then started forming the light blue megaphone to work its way back to the rising wedge bottom.

QQQ’s last trip to the light blue megaphone top reversed on an exact tag of the top.  That means QQQ is a favorite to make another run for the megaphone top after reaching the megaphone bottom.

The retrace target for the gray rising wedge is a bit over 100.  QQQ also has a mandatory megaphone retrace to VWAP at roughly 100 to be legal for a breakout upwards.  The megaphone bottom is now approaching 70.

QQQ is Starting to Drag

QQQ Keeps Returning to the Bottom of its Navy Blue Roll-Up Price Channel without having Reached the Top

QQQ Keeps Returning to the Bottom of its Navy Blue Roll-Up Price Channel without having Reached the Top

QQQ keeps tagging the bottom of its navy blue roll-up price channel without making it to the channel top. That could mean a top is forming, though we don’t know for sure until it breaks the channel bottom.

I’ve drawn a rising wedge top (orange) inside the channel with a megaphone top as part of an even more extended top just to show you how long a top here could drag out. QQQ could also put in a much faster, smaller top here, or it could zoom up to the top of the channel (or even break out upwards from it into a steeper channel) to start a new top much higher.

QQQ Long-Term Rising Megaphones

QQQ Long-Term Rising Megaphones

QQQ needs a pullback to at least the 106 area.  It has a decent chance of correcting all the way to the area of the August 2015 low. A correction to the level of the 2010 lows is possible.

We’ll know a lot more after we see how long it takes QQQ to top.

The blue rising megaphone isn’t carved into stone (no trading formation ever is).  I could be redrawing it to allow for extensions depending on how this top plays out.

QQQ Nears Its Price Channel and Rising Wedge Tops

But Do Not Short Too Soon!

QQQ is Nearing its Orange Price Channel & Blue Rising Wedge Tops

QQQ is Nearing its Orange Price Channel & Blue Rising Wedge Tops

QQQ is approaching its orange roll-up price channel top and blue rising wedge top. I drew a classic megaphone top on the chart to show a typical way this move would end (green scenario).

But you never want to short a price channel melt-up set-up until a top completes because these price channel set-ups can complete with huge vertical blow-off top moves (pink scenario).

Price Channel Melt-Up Set-Ups Often Complete with a Big Vertical Move

Although QQQ has maxed out the number of waves in its price channel melt-up set-up, it has to complete with a top and there’s no confirmation that it has even started a top.  And the top it eventually starts to form could be an extremely thin, fast-moving, vertical rising wedge that carries the price all the way to 140.

The blue rising wedge would usually break out downwards, but they do sometimes break out upwards into huge, fast moves.

How to Play It

I’m watching for QQQ’s price action at the top of the orange price channel. A pierce of that followed by a partial pullback then another breakout would mean a rising wedge top, even a blow-off top.

If QQQ returns to the orange channel bottom after reaching or piercing its top, it means it’s forming a more conventional megaphone or H&S top.